Why we must “Abolish” Private Property
A contrarian capitalist’s view.
The Party Programme published on the People’s Liberation Front (JVP)’s website states,
55. This is the era of proletarian socialist revolution where the means of production is converted to social property. The production of commodities is evicted by direct social production led by the mass of class-conscious proletariat voluntarily assembled. The socialist revolution in Sri Lanka will eliminate the private ownership of property and abolish the basis of class division in society, thus putting an end to the process of exploitation of man by man, and thereby man finally liberated.
On the one hand, there is some debate if this is still the official policy of the JVP, and their broader coalition partners in the National People’s Power (NPP). Or if this is obsolete content on an outdated website.
On the other hand, many have already passed judgement that the JVP are Wolves in Sheep’s Clothing. And they are not what they say in public, but what they say on their website. In other words, they are fundamentalists Marxists.
This article is not about the JVP or their policies. Instead, it is about a few points I want to raise about private property in Sri Lanka, and its ownership.
Point 1: “Private ownership of property” is not black and white.
Even in the most capitalists countries, owners pay various forms of property tax. For example, if you own a house in Silicon Valley you pay around 1.25% of its value in tax every year.
A zero-property tax would be “white”. The effective tax in a communist state where the state owned the property would be 100% or “black”. The reality is many shades of grey.
Point 2: Private ownership only works if it is efficient.
Those who believe in private ownership assume that property ends-up in the hands of those who can make the best use of it. Or in other words, because they assume it is an “efficient” mechanism that will promote further creation of wealth and value.
Sadly, in many places, especially Sri Lanka, this is not true.
Consider the following thought experiment.
In the last 20 years, Sri Lanka’s GDP growth has average around 4.5% per year. Now, 10 perches of land in Colombo 3, 4, 5 or 7 would cost north of LKR 200M. 4.5% per year of LKR 200M is LKR 9M per year; or LRK 750K per month.
Can you rent such a property for LKR 750K? Note, that this only counts land value. The effective rent of a well-furnished house or a well-equipped office should be much higher.
Not only do most people who own such property not get so much rent, they don’t need to. They have enough other income to sustain them (usually in some luxury). This phenomenon is true in the whole country. I just picked Colombo since it is very visible to those like me who live here.
In other words, private property in Sri Lanka is not in the hands of those who can make the best use of it. Our assumption is broken.
Solution: Property Tax
Property tax is a good way to make sure property is used efficiently. You’re not going to waste it, if it costs money to keep. We can figure out the details later, but our property tax rate should be of the same order as our GDP growth rate.
For comparison, in Silicon Valley (in a country with much slower growth), you pay 1.25% of your house or office value in property tax every year. This is the case in most (properly and “property”) capitalist countries.
Point 2a: Inefficient private property has plenty of side-effects (especially in the private sector).
One of the most frustrating things I have to deal with in Sri Lanka is talking to the idiots who run our private sector.
These people don’t have any credible qualifications, intelligence or experience. The only reason they have their jobs is because they have the right fathers, went to the right schools and have the right accent.
And yes. They also own property. Lots and lots of property. Up and down the island, which they are happy to keep barren or empty “for land value”.
When property ownership is inefficient, the inefficiency disease spreads to organizations and the country.
Point 3: De-facto “Private property” should be abolished for the state.
Depending how you count (and counting is hard), the Sri Lankan state owns 50% to 90% of the country’s total property. So, JVP aside, the UNP and the SLFP (and their bastard progeny from both sides of the bed) have been effectively running a Communist State, where property ownership is centralised in the state.
For the Sri Lankan state (and all Communist States), de-jure “public property” is de-facto “private property” of those in power and their sponsors in the private sector. At best, a few scraps trickle down to the public.
Much of what I said for private individuals, also applies to the state. If the state owns 2 acres in Cinnamon Gardens, they should make sure that the return from the property is proportional (~LKR 24M per month, by our previous methods).
To encourage efficient ownership, the state must also pay property tax, at the same rate as private individuals. How would this work? Would the state “pay itself”?
We would look at property, the same way we look at water or electricity. Using property (like land) for some length of time should costs money, just has a unit of water or electricity does. So just as government departments have water and electricity bills, their property tax should be included as an expense.
This will encourage the state to privatise or close loss-making entities and liquidate their property.
Note, we mostly discussed “land” as property, but the same principle applies to water, natural resources, and all other “things of value”.
Concluding Apology
Some of you might have only read the title “Why we must Abolish Private Property”, concluded that I was a stark-raving communist, and promptly called your neighbourhood CIA hitman.
But, if you take away one thing from this article, take away Point 1. Or “Private ownership of property is not a black and white thing”. It is grey, nuanced, and requires reasonable and intelligent thought.
If you treat it like an inviable religious tenant (and many of you do, for or against it), we are all doomed to our current fate.
So, apologies to the for the click-baity title. I did mean “Abolish”. But, probably not in the sense way you expected. Instead, in the sense of “Abolish the inefficient status-quo”.
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